It’s been a rough decade for energy stocks.
The Energy Select Sector SPDR Fund (NYSE: XLE) has only returned 28.5% in the last 10 years, while the S&P 500 has returned a massive 289.5%!
But, as Bob Dylan sang: “Times, they are a-changin’.”
The energy sector is gaining investors’ favor, and it’s time for you to take advantage of this market trend.
Using Adam O’Dell’s proprietary six-factor Green Zone Ratings system, I found a “Strong Bullish” energy stock that has jumped 20% in the last two months. It’s currently trading at a new 52-week high.
This company is an energy sector giant and is poised to get even bigger thanks to a massive acquisition in the works.
Here’s why you should buy this energy stock now.
Energy Stocks Shun the Market Sell-Off
Energy stocks took a beating in 2020.
Including capital gains and dividends, energy stocks returned a dismal negative 32.8% that year.
Last year, the trend reversed as energy stocks returned 53.4% compared to the S&P 500 returning just 28.7%.
And 2022 is shaping up to be another incredible year for energy stocks thanks to commodity prices and global events like the conflict between Russia and Ukraine.
XLE is an exchange-traded fund (ETF) that tracks the performance of the energy sector within the S&P 500.
It has returned a massive 24.4% since the start of the year! The recent market sell-off pushed the S&P 500 down 8% during that same time.
Here is one high-performing energy stock that is poised for strong performance in 2022 and beyond.
A Massive Momentum and Growth Energy Stock: Chevron Corp.
Today’s stock is an old energy name that everyone knows about.
Chevron Corp. (NYSE: CVX) is a global energy, chemicals and petroleum company. It develops and produces crude oil and natural gas, then transports finished products to the open market.
Outside of its fantastic Green Zone Rating (more below), two things about Chevron make it a strong buy in my eye right now:
- Chevron is in “advanced talks” to buy Renewable Energy Group Inc. (Nasdaq: REGI) — an American renewable fuels giant — for $3 billion.
- In late 2021, the company said it was planning to invest $10 billion in low-carbon emitting energy sources (think: wind, solar, hydro and nuclear power) through 2028.
Let’s dig into the numbers.
In 2020, Chevron’s total annual revenues dropped 32.5% from the previous year, but it rebounded in 2021.
CVX’s total annual revenue last year was $155.6 billion — a 64% increase over the previous year.
This year, Chevron is expected to report total revenues of $183.9 billion — an 18% gain from 2021 and a new record for the company.
CVX Pushes to New 52-Week High
CVX mounted a massive rally starting in September 2021 — surging more than 45%.
It’s even managed a 20% gain since the start of 2022, despite sell-off pressures from the broader market.
Chevron Corp. Stock Rating
Using Adam’s six-factor Green Zone Ratings system, Chevron Corp. stock scores a 90 overall. That means we’re “Strong Bullish” on the stock and expect it to beat the broader market by at least three times in the next 12 months.
CVX rates in the green in five of our six rating factors:
- Momentum — CVX has been on a tear since the start of 2022. Its stock price has risen more than 20% in the first two months of the year. It rates a 93 on momentum — meaning it’s in the top 7% of all stocks we analyze.
- Volatility — CVX reached its 52-week high with very little resistance. The company scores an 87 on volatility. It’s less volatile than 87% of the stocks we rate.
- Growth — CVX’s one-year annual earnings-per-share growth rate is a whopping 375%. Its one-year annual sales growth rate is 65.6%. It scores a strong bullish 86 on growth.
- Value — The company’s trading ratios are right in line with its oil and gas industry peers. It trades with a price-to-earnings ratio of 17.2 and a price-to-sales mark of 1.73. It scores an 82 on value.
- Quality — CVX’s returns on assets, equity and investment are all right in line with the industry. It also operates with a net margin of 10% — higher than the 8.9% from its peers. The company scores an 81 on quality.
Chevron’s $273.4 billion market cap earns it a 0 on size, but its scores on our other metrics make it too good to ignore.
CVX also comes with a forward dividend yield of 4.05%, or $5.68 per share.
Bottom line: Traditional energy stocks have outperformed the broader market thanks to higher energy prices.
Chevron has enjoyed this massive run-up, of course.
But it also recognizes the current landscape of the energy sector. And its $3 billion planned acquisition of REGI indicates it is ready to invest heavily in renewable energies like wind and solar.
With strong momentum, little volatility, outstanding growth and solid value, CVX is a stock worth considering for your portfolio.
Note: Old energy is experiencing a huge surge right now, and CVX is a great way to play that momentum.
But we know the future lies in renewables.
Adam and the rest of the Money & Markets team are putting the final touches on a presentation that highlights the largest untapped energy source in the world.
This source is worth trillions of dollars. It makes massive oil fields look tiny in comparison.
We’re still in the early stages of this resource being unleashed, and this breakthrough is set to turn the global energy market on its head.
Adam will have more information about this revolutionary new renewable tech (and one company behind it all) later this week.
Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He is a certified Capital Markets & Securities Analyst with the Corporate Finance Institute and a contributor to Seeking Alpha. Prior to joining Money & Markets, he was a journalist and editor for 25 years, covering college sports, business and politics.